New York poised for a banner IPO year led by Oscar, Compass, UiPath
Wall Street has long made New York the center of the banking universe. But the city’s tech scene is finally having its moment.
After a smattering of IPOs over the last decade from companies like Etsy, MongoDB, Datadog and Peloton, there’s a whole roster of New York-based tech businesses lined up to hit the public markets this year.
On the docket for the coming days are New York City’s DigitalOcean, a provider of data center and cloud technology, and Buffalo-based auto marketplace ACV Auctions. Real estate brokerage Compass is on file to go public and UiPath’s prospectus is expected to land soon.
The 2021 flood comes after a tech IPO boom last year, with Snowflake, Airbnb and DoorDash each raising over $3 billion. The volume of IPOs more than doubled last year to 494, according to FactSet, and the New York Stock Exchange had its busiest year on record.
The biggest offerings and most valuable companies have consistently come from Silicon Valley and San Francisco, the center of the venture capital industry and, along with Seattle, home of the industry leaders. In 2021, New York is poised to capture a larger share of the dollars — and attention.
“This has been a long time coming for New York tech,” said Mitch Wainer, co-founder of data center operator DigitalOcean. Wainer left the company in 2018 and began working on other start-ups. “There’s been a lot of money, venture capital invested in New York tech over the years.”
New York entrepreneurs and investors attribute the strong IPO pipeline to an established ecosystem of successful techies who have reinvested in their peers and helped lure talent to the area. There’s also been a new generation of businesses bringing tech to health care, finance and real estate, which are massive industries in New York and New Jersey. And New York has a thriving venture capital community, headlined by names like Union Square Ventures and Insight Partners, helping fuel expansion in the nation’s largest city.
In health care, insurance company Oscar began trading on the NYSE earlier this month and is now worth about $6.2 billion. Josh Kushner’s Thrive Capital, based in New York, is the biggest shareholder. In finance, online home insurer Lemonade went public last July and is now valued at $6.1 billion. Compass, a tech-powered real estate brokerage, filed its paperwork in early March, following revenue growth last year of 56% to $3.7 billion.
“We grew up with all of these companies in the New York tech space,” said Wainer, noting that Oscar was one of its neighbors. He also cited software companies MongoDB and Datadog, which went public in 2017 and 2019, respectively, as companies that helped juice the tech scene.
“I think you’ll see more IPOs, absolutely,” Wainer said. “There’s a wave of them coming. And then you’ll see new companies in spaces that are ripe for disruption, like real estate, starting to bubble up.”
Founded in New York almost a decade ago, DigitalOcean is gearing up for its IPO next week. Last valued at $1.15 billion in a 2020 funding round, DigitalOcean said it expects to sell shares at $44 to $47 per share, which would give it a market cap of about $5 billion at the top of the range.
For Wainer’s latest gig, he reunited with his DigitalOcean co-founders Alec Hartman, Ben Uretsky, and Moisey Uretsky to start Welcome Homes, a residential real estate platform. They raised a $5.35 million seed round in October.
Rick Heitzmann, a partner at New York-based venture firm FirstMark Capital, told CNBC that skeptics of New York tech have continued to move the goal posts for the city in determining its success. Years ago they asked if New York could produce $100 million exits, he said. Then it was $1 billion, then $5 billion and $10 billion market caps, all marks that have been surpassed.
MongoDB is worth close to $20 billion, Etsy and Datadog have passed $25 billion and Peloton is valued at over $30 billion.
“New York has quietly been ticking off the boxes in a way that some people haven’t paid attention to,” said Heitzmann. “You had to have planted the seeds 10 years ago to see the returns now. You can’t say, ‘Hey, we want to have a lot of billion-dollar tech companies tomorrow,'” he said, referring to other markets that are trying to establish themselves as tech hotspots.
New York City’s IPO spotlight comes at a time when many who are reaping the benefits aren’t in the city due to the Covid-19 pandemic and a newfound ability to work from anywhere. New York’s economy is suffering from small business closures and a plunge in activity, which led to the loss of over 620,000 private sector jobs in the city as of January.
For one high-growth New York tech company, the pandemic has created an unprecedented surge in demand for its products. UiPath, which uses artificial intelligence to automate back-office, repetitive and time-consuming tasks, was valued at $35 billion in a private financing round in February. With workers spread all over the place and businesses out to boost efficiency, companies have been increasingly turning to UiPath’s technology.
“Covid-19 has heightened the critical need of automation to address challenges and create value in days and weeks, not months and years,” founder and CEO Daniel Dines said in a July statement. In December, UiPath submitted a draft registration with the SEC, disclosing its intent to go public, and people familiar with the matter told CNBC last month that the company plans to pursue a direct listing.
The pandemic has also bolstered companies across the health sector, playing into New York’s strengths. Talkspace, a New York-based online therapy provider, agreed in January to go public through a special purpose acquisition company, or SPAC.
Tusk Ventures co-founder Bradley Tusk, whose firm is headquartered in New York, said other local digital health companies in his portfolio like mental health start up Alma, dentist service Tend, and online pharmacy Ro are seeing impressive growth. Reuters reported in January that Ro was in talks to go public through a SPAC.
“In the same way that the norm shifted in Covid, where offices no longer have to be in the same place they were before, people are also more willing to get their health care online now,” said Tusk. “That’s a huge opportunity.”
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